Bridging the ‘Valley of Death’

Universities help young biotech companies reach the marketplace

As president of Virginia Tech Intellectual Properties, one of Mark Coburn’s primary jobs is helping inventions created at the university reach the marketplace. It’s a mission he takes seriously — after all, he owes his daughter’s life to medical technology developed from university research.

When his daughter Emily, now 8, was born, she was placed in the neonatal intensive care unit because too much fluid was building up in her lungs, and she was struggling to breathe. Her doctors told Coburn not to worry; they were using a cutting-edge lung surfactant technology pioneered at the University of Rochester, where Coburn was then working.

“It was kind of a defining moment in my career in terms of how tech transfer works,” Coburn says. “If it didn’t work …” His voice trails off.

At some schools, operations devoted to monetizing university research “can be viewed as money grubbers, but really our effort is to try to get the technologies out to benefit society,” Coburn says. “That doesn’t happen without a university dedicated to transferring technologies to the marketplace. It doesn’t happen by itself. Without us, a lot of technologies would just sit on the sidelines.”

Virginia’s research universities increasingly are working with the biotechnology industry to come up with ways to shepherd young biotech companies across the so-called “valley of death” — the gap between the development of a new technology and its successful commercialization.

University divisions, such as Virginia Tech Intellectual Properties or the University of Virginia’s U.Va. Innovation, work closely with investors and corporations to foster practical applications for university research (a field known as translational science). Universities may license in-house research to existing corporations or encourage the spinoff of profitable startup ventures. They also offer business development assistance to faculty or student researchers, helping them learn about how to market their creations and think more entrepreneurially.

The federal Bayh-Dole Act, passed in 1980, allows universities to market and financially benefit from university research developed with federal grant money. Typically, as an incentive, universities will grant a share of the profits, from 30 percent to 50 percent, to the researcher who develops the technology. The researcher’s department also receives a share of the profits, as does the university itself.

“In the past, universities saw their role as creating science and publishing it and teaching it,” says Mark Crowell, executive director of U.Va. Innovation. “We’re now embracing our responsibility and our opportunity to broaden our innovation assets, both for societal benefit and for economic development benefit.”

Like U.Va. and Tech, Virginia Commonwealth University also is focused on capitalizing on its in-house research. At VCU, that means recruiting bioscience-minded CEOs and angel investors to create startup companies. At present, the VCU Office of Tech Transfer is seeking to spin off two companies — one would market a new rapid test for strokes; the other would market a new surgical mesh that mimics the fibers in the human body.

As VCU seeks to bring these startups to market, it’s important “not to put on onerous terms that will kill the business,” says Ivelina Metcheva, executive director of the VCU Office of Tech Transfer. “We try to be business friendly … We don’t ask for cash up front. We ask for equity in the company in lieu of licensing fees or annual minimums. We work with them to help preserve cash and use it for the right purposes. Usually we get some share of royalties on net sales and a percentage of any sublicensing deals they do in the future.”

Thinking about the marketplace also means that universities are more focused on practical applications. When U.Va. Innovation considers projects to aid with grant money, “We’re no longer picking projects because it’s good science,” says Crowell. “We’re picking projects that are good science and fit a market need.”

U.Va. was one of a handful of universities in the nation over the last decade that received $15 million from the nonprofit Wallace H. Coulter Foundation to establish a Coulter Translational Research Partnership. With this funding, U.Va. Innovation has offered grants of less than $100,000 to help research projects at the university bridge the valley of death. “It takes a basic discovery and helps get it ready for market — building a prototype, running an animal trial — whatever it takes to address the questions that commercial partners or investors would ask,” Crowell explains.

One of the startups that benefited from U.Va.’s Coulter funding is Charlottesville-based HemoShear. It uses human cell cultures and blood-flow forces in petri dishes to produce biological replicas of blood vessel systems and diseases for use in drug testing and discovery. The technology was developed by three U.Va. researchers who are partners in the company.

Founded in 2008, HemoShear is “fast approaching profitability,” says HemoShear CEO Jim Powers. It has raised more than $13 million in capital from investors and has received more than $5 million in research grants.

HemoShear used a Coulter grant to conduct a proof-of-concept experiment, studying the effects of the cholesterol drug Lipitor in HemoShear’s replicated human system.

Pharmaceutical companies are using HemoShear technologies to make faster and more accurate judgments about the efficacy and safety of drugs before proceeding to human trials. “Traditional cell cultures and animal models don’t do a good job in mimicking the human system,” Powers says. “There’s a clear need for better predictive systems in the laboratory that will accurately predict the human response to a drug.”

“Many companies get discouraged when they find out how extensive the process is, getting ready for commercialization. You have pre-clinical trials, you have mechanical trials, you have clinical trials, you have regulatory aspects to take care of,” says Erik Gatenholm, CEO of BC Genesis.

Gatenholm, 23, graduated from Virginia Tech in 2012 with a degree in business management. He and his father, Paul, a former Tech material sciences engineering professor, started BC Genesis in 2008 to market his father’s inventions, including new manufacturing methods for bacterial cellulose that can be fashioned into medical products such as biosynthetic surgical mesh, sutures and replacement knee menisci. Their goal is to prepare the company so that it can be acquired by or merged with a larger corporation.

Increasingly larger pharmaceutical and medical companies are expecting startups to take on the financial burdens of passing regulatory hurdles and manufacturing prototypes. “In today’s market, no company is going to buy you out just hearing about your ideas. It’s going to take a lot of studies and positive and strong data to make the case,” Gatenholm says.
He advocates creating a detailed commercialization plan, networking with others who have been through the process and being creative in pursuing grants and funding. BC Genesis started in a lab space at the Virginia Tech Corporate Research Center. It’s now constructing a full-scale manufacturing laboratory in Floyd County with the help of a $700,000 grant from the Virginia Tobacco Indemnification and Community Revitalization Commission, secured with help from local economic development officials. BC Genesis also received two $600,000 National Science Foundation grants.
“Don’t be discouraged. It pays off,” Gatenholm says. “Just believe in your product.”